Brandon Drew walks through pricing models and monetization strategies, comparing advertising, product sales, and data acquisition. He covers customer acquisition cost, lifetime value, churn rates, and how to use metrics like marketing ROI to decide where to spend.
Chapters
So this gets back, and I've already touched on pricing guidance. I like always to bring this up because as part of client acquisition comes in the pricing. One of the things that we just got to go back to basics on, there's only a couple of real different ways that you can actually make money. The old school way, which is the Google way and the Yahoo way, which is selling advertisement. You provide a very simple service. Let's just look at Google. They provide a search A really easy way of indexing everything that's on the content so you don't have to go typing in a specific IP address. You can search up a term and it provides a result. But they're an advertising company. Well, up until when they converted over to Alphabet, right? But that's basically all their revenue. Same thing with Facebook. It's all revenue. All revenue based on advertising. The only other way that you can really make money in the digital world is by selling a product or service, whether that's, you know, A digital service and/or products. But there's a newfangled area as well. And you might actually be a hybrid of a couple of these different things. You might be— and the new one is acquiring data and users. A great example of this is Instagram. Instagram had 14 employees. They never made a dollar. Never made a dollar. Because they were all about acquiring users. And And that user data was extremely important to Facebook at that time because Facebook's cohorts, their power users, started turning out to be moms 40 to 55 playing FarmVille. And they were losing all the millennials, right? All the millennials were going, I don't want to be on there. My mom's on there. So they started using Instagram, right? And all of a sudden, Instagram started growing like gangbusters. Facebook realized that Instagram was acquiring over 200,000 new users a day in China. That's a lot of users. That was one big marketplace. And I don't know if you guys remember this, about 5 or 6 years back, Zuckerberg was trying to learn Mandarin. I don't know how he's doing on that. But that was one of the biggest places that he wanted to expand his company. And that user data was extremely, extremely valuable to him. That velocity that he had of Instagram onboarding users. Again, another eye chart. But what we do get to— and I wish my graphics were a little bit better on this— is if you see this top triangle, I want you to envision that laying on its side. And that's the funnel we were talking about a little bit earlier, right? And now we have this bottom triangle. And this is where you guys are when you guys get into your maturing marketplace, right? You guys won't be here. But again, kind of going back to we have to keep a broad vision of where we want to be and how we're going to get there. Be extremely tactical right now, but also have a big vision of how we're going to— what's really going to matter. We don't want to be a 20-person company. We have aspirations to be a 100,000-people company. And what marketplace are we getting out there to? And so what happens is you get a very linear funnel and what I like to call the barbell effect, right? You have funnel coming in, you have your client life right through here. But then a good part of client acquisition is that backend. How do we do upselling? How do we do cross-selling? What other services can we provide to them? That goes back to that banking model, right? And then one of the biggest and most important, how do we get them to be a loyal advocate for us, to tell their friends? Because that is when you know you really have struck a chord within the marketplace, struck a chord within your branding, and everything else that falls with it. There's tons of stats on this in terms of, you know, I think I have 71% are more likely to purchase if they've heard it through a friend, yada yada yada. But through all this stuff, what you want to be looking at, and I kind of broke it up, if you can imagine that these— this top section to create Is attributed to your new client aspect of that funnel or at the left side of that barbell. Managing, and what you want to do is you want to create the lifetime value of your client. Retention is the name of the game. You want to look at what your churn rate is. All those things again, as we go from here to here, looking at those gates, looking at the percentages, trying to figure out where people are dropping off on and when they're staying on, how do we get them to cross-sell? And that's where we get into this section through here. Okay? How do we get them to expand that out? We can go through— you can look up on the internet all the different acronyms. Figure out those formulas. I didn't put them up here because it's no sense in going over it. Again, some of this stuff is Business 101, right? But prospecting, this again, kind of more messaging towards your prospective client. What's their total cost of ownership? What's the ROI that they're going to receive using your product? That's some of the content marketing stuff that you want to send out. Internally, what you want to be looking at is where are your COGS? What's your client acquisition cost? What's the LTV and everything else in between of that? And one of the things that I think gets most overlooked is what is the marketing as it is to the client acquisition percentage, right? How much money are you putting into those various different channels? Really focus in on, we just spent $20,000 at a trade show. How many leads did that generate and how are those leads converting? If it's going well, do it again. If it's one of the lowest percentages of actually getting clients, maybe you should reevaluate where you're spending your time and energy. One of the biggest hurdles that everybody has in this room, actually probably in life, is time, opportunity costs. You want to be as nimble as possible and make mistakes as fast as possible. And again, you guys have probably heard this countless times. But unless you're actually taking your emotional self out of the situation and actually looking at the raw data, not the fact that you just spent a weekend at Las Vegas for the trade show and it felt really good to be out there, really look at the metrics, right? Getting towards the end of the presentation. Does anybody have any questions about this? There's a lot on here. But again, what I'm trying to— I guess what I'm trying to restate is as we build a funnel in to get a new client, That funnel then becomes, as your business matures, not a funnel but more of a barbell aspect. This is just basic. Does the client actually make you money or are you losing money? I just like this because— and I actually have this at my desk because that's some of the metrics that I have to look at in terms of what we do day to day is because it's the most basic, right? How much does it cost to acquire a company and what's the lifetime value? So that's it, folks. I like to call it painting by numbers because that's basically what we're looking at is all these different types of metrics in order to build out a model that we can actually start focusing on looking at the raw data and how does our product actually fit within the marketplace. And how much money we're gonna make. And when do we actually go from working one segment to the next segment, expanding out our client— our prospective clients and going after the larger market?
